FCC Takes Wraps Off Media Ownership Proposal

As advertised, the FCC Thursday (Oct. 26) released the proposed text of a deregulatory media ownership rule revamp that has broadcasters celebrating and Hill Democrats fuming, with some of the latter calling it a gift to the proposed merger of Sinclair and Tribune, which would not have to spin off as many stations.

An FCC official speaking on background called that criticism an effort to impugn motives rather than debate substance, with the motive being FCC chair Ajit Pai's long-held philosophy that the rules need a deregulatory revamp.

Pai let that deregulatory cat out of the bag Wednesday (Oct. 25) at a Hill hearing. He had signaled back in August that such a revamp was in the works, likely before year's end.

The item is scheduled to be voted Nov. 16, with the rule changes taking effect after publication in the Federal Register.

FCC officials speaking on background outlined the combination order and Notice of Proposed Rulemaking Thursday prior to its release late in the day, and outline the reasons behind its proposal, notably that in a world filled with digital competitors, the rules are outdated The order is responsive to reconsideration petitions for the most recent Quadrennial Media Ownership Review order issued under the previous FCC.

The order eliminates the newspaper-broadcast and the radio-TV cross-ownership rules; allows dual station ownership in markets with fewer than eight independent voices after the duopoly, creating an opportunity for ownership of two of the top four stations in a market on a case-by-case basis (the FCC is not calling it a waiver); eliminates attribution of joint sales agreements as ownership; and creates an incubator program.

It still requires stations to notify the FCC of joint services agreements and does not change the dual-network ownership prohibition. There will also be no change in the local radio station rule. So, the maximum of eight radio stations and two TV stations in a market will remain, but the markets that will be allowed in will change.

And broadcasters can now own newspapers again, which has been prevented -- with some grandfathered combos -- since 1975. An official said anyone who wanted to buy a newspaper these days should be thanked, not deterred.

Asked about charges the local ownership rule changes were tailor-made to ease the Sinclair-Tribune merger, a top FCC official pointed to Pai's consistent and longstanding position that the ownership regs need updating for the digital age. The suggestion is that Sinclair could have easily read those deregulatory tea leaves and decided to strike while the tea was hot, as it were.

The official said that the suggestion the changes--which respond to petitions for reconsideration from NAB and Nexstar, but not Sinclair--are to benefit any one company are at odds with the chairman's long deregulatory record.

Asked what factors the FCC would use in those case-by-case reviews of top four stations, he said the FCC is still working on them, but that the order provides some examples that provide guidance.

He said that the value of what he called a "hybrid" approach of case-by-case review was that not all markets were created equal. While some markets have strong delineations between the top four and the rest, in some there might be five strong stations, or only three and a distant fourth competitor.

As to eliminating the eight-voices test and allowing duopolies in smaller markets, he said officials knew of no finding anywhere that eight competitors were required in a market to make it competitive.

Pai has long pushed for an incubator program, but it will be a bit longer before that takes shape.

The official said there was not a sufficient record to come up with specifics for the program, so the FCC is issuing an accompanying Notice of Proposed Rulemaking on how to structure it, how to define the eligible class, what activities would qualify, how to monitor it and what benefits would inure to the incubator.

In a 17-page opus of a dissent then commissioner Pai said that while "the video marketplace has transformed dramatically," the FCC has done nothing but rubber stamp the radio and TV ownership rules. "The more the media marketplace changes, the more the FCC's media regulations stay the same," calling the quadrennial an "ostrich of an order" that was not what Congress intended when it required the periodic reviews of whether regs were still needed.

NAB challenged the Wheeler decision in court, but dropped that in favor of asking the newly Republican and deregulatory FCC to reconsider the decision.

The Pai FCC will undertake its first quadrennial in 2018.

“We commend Chairman Pai for acknowledging the realities of the modern video and media marketplace, and for planning updates to broadcast ownership rules enacted in the last century before the internet became ubiquitous," said TEGNA president Dave Lougee. "Localism and local journalism will be greatly enhanced by allowing broadcast station owners to combine duplicative resources, and our local consumers will benefit if stations have the scale necessary to compete with massive distribution and technology companies who don’t share our local values and mandates."

"The Commission's recognition of changed market conditions and acknowledgement of increased competition in the video market is consistent with the view coming from Wall Street," said Adonis Hoffman, chairman of Business in the Public Interest and former chief of staff to commissioner Mignon Clyburn. "Investors actually want to see a thriving broadcast sector, and adjusting the rules will be well received."

The Coalition to Save Local Media, which is a coalition of cable, satellite operators and others trying to block the Sinclair-Tribune deal, was not pleased, and used it as an opportunity to slam the merger.

“Rather than weakening existing media consolidation rules, the FCC should seek further answers from Sinclair-Tribune on how they plan to comply with current law and how their proposed mega-merger is in the public interest," the group said in a statement. "Thus far in this process, Sinclair-Tribune has utterly failed to prove their proposed merger is in the public interest and have only provided vague promises, incomplete answers and unpersuasive evidence. This merger should be denied."

"At the Oct. 25 FCC Oversight Hearing in the House, there was a great deal of lip service to the First Amendment," said Benton Foundation Executive Director Adrienne Furniss. "Today’s action does not walk that talk. Diversity advances the values of the First Amendment, which, as the Supreme Court has held, “rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public.” Previously, the FCC has elaborated on the Supreme Court’s view, positing that 'the greater the diversity of ownership in a particular area, the less chance there is that a single person or group can have an inordinate effect, in a political, editorial, or similar programming sense, on public opinion at the regional level.' Today’s proposal fails that commitment.